Asset Quality: Jaiz Bank Sets N1bn for Q4 Impairment Charge
Amidst rising pressures on asset quality, Nigeria’s premier non-interest lender, Jaiz Bank Plc has estimated N1 billion as an impairment charge on credit assets for the fourth quarter of 2023.
This is according to a regulatory filing signed by its acting managing director and chief executive officer, Ahmed A. Hassan who projected that cash flow from operating activities would also be negative in the period.
Last week, Jaiz Bank Plc gained weight in the stock market as the Islamic lender’s share price rose slightly from N1.58 at the beginning of the week to N1.60 on Friday.
Due to selloffs on Nigerian Exchange market movers in the banking sector category, the Banking index lost 3.24%. Some traders said profit-taking started after FTSE Russell announced a decision to downgrade the Nigeria Index.
Jaiz Bank Plc saw both positive and negative price movements in its share price, printed higher at N1.67 midweek before it nosedived two consecutive sessions afterwards. In a regulatory filing, Jaiz Bank said the non-interest lender profit for the fourth quarter would be at about N2.5 billion on gross earnings of N12.783 billion in the same period.
The top line is projected to grow on the back of a solid increased income of N12.368 billion from contract financing in the latter part of the year. Of the sum, the Islamic bank is estimated to spend less than N2.5 billion on funding sources, according to the regulatory filing.
Cash generated from operating activities in the period is expected to be N1.111 billion negative, having booked N1 billion as impairment charges on loans. MarketForces Africa reported that the bank stage 2 loans are fast rising, according to Fitch Ratings.
In June, Fitch said the bank was faced with single-borrower credit concentration which the ratings considered to be high. In the rating note, Fitch noted that 20 largest customer exposures represented 38% of gross financing assets at the end of 2022.
It added that lending to agriculture and related industries – viewed as relatively higher-risk- was also high, estimated at about 36% of total financing in 2022. Jaiz Bank has aggressively grown financing assets in recent years, which creates seasoning risks to asset quality.
Its impaired financing ratio increased markedly to 9.7% in 2022 from 5.9% due to economic challenges and the seasoning of its financing portfolio. Specific loss coverage of impaired financing assets was 47% in 2022, according to Fitch, underpinned by collateral. #Asset Quality: Jaiz Bank Sets N1bn for Q4 Impairment Charge Naira Devaluation Deepens Economic Crisis in Nigeria